Passive Entities
An entity is a passive entity only if the entity is a general or limited partnership or a trust, other than a business trust and during the period on which margin is based, the entity’s federal gross income consists of at least 90 percent of the following income:
- Dividends, interest, foreign currency exchange gain, periodic and non-periodic payments with respect to notional principal contracts, option premiums, cash settlement or termination payments with respect to a financial instrument, and
- income from a limited liability company.
- Distributive shares of partnership income to the extent that those distributive shares of income are greater than zero.
- Capital gains from the sale of real property, gains from the sale of commodities traded on a commodities exchange, and gains from the sale of securities.
- Royalties, bonuses, or delay rental income from mineral properties and income from other non operating mineral interests
And the entity does not receive more than 10 percent of its federal gross income from conducting an active trade or business. In making the computation under this Subsection, income described by the previous section may not be treated as income from conducting an active trade or business.
However, the previous section describing the 90% income does not include income from rents or income received by a non-operator from mineral properties under a joint operating agreement if the non-operator is a member of an affiliated group and another member of that group is the operator under the same joint operating agreement.